House Democrats Want Tax Hike to Offset AMT Loss

Network News

House Democrats want to use a parliamentary maneuver to push a $70 billion tax increase through a reluctant Senate, a move intended to spare millions of taxpayers from an unpopular tax without driving up the deficit.

Under the plan, the House would prevent the alternative minimum tax from expanding to include more than 20 million additional households at tax time in April 2009, a change that would ordinarily deprive the Treasury of billions of dollars. To cover the cost, House tax-writers said they would come up with a proposal to raise the money elsewhere. That bill would be sent to the Senate in a fast-track package that would need only a simple majority to pass, denying Republicans and conservative Democrats the chance to filibuster.

John M. Spratt Jr. (D-S.C.), chairman of the House Budget Committee, unveiled the plan yesterday as part of a budget blueprint for fiscal 2009. The House plan would also increase spending for such domestic priorities as public education and benefits for military veterans while erasing the federal deficit over the next four years. Spratt contrasted his spending plan with the budget proposed last month by the Bush administration, which also proposes to spare middle-class voters from paying the AMT, but without offering a way to pay for it.

"When we set out to do this budget, our overriding objective was to balance it because we are appalled at the mountain of debt being left our children and at our stature in the world as the greatest debtor nation," Spratt said. "Our budget resolution for fiscal 2009 is no grand solution, but it moves us in the right way."

The AMT was created to nab wealthy tax dodgers, but because it was not indexed for inflation, it threatens to ensnare millions of middle-income households. Last year, the House approved a plan to reform the AMT and to cover the cost in part by imposing new income taxes on the hefty commissions claimed by Wall Street financiers. The Senate repeatedly rejected the proposal.

Senate Republicans and White House officials assailed the newest proposal. "The administration does not believe the appropriate way to protect 22 million additional taxpayers from [the AMT] is to impose a tax increase on other taxpayers," said Christin Baker, a spokeswoman for the White House budget office. Sen. Judd Gregg (N.H.), the senior Republican on the Senate Budget Committee, accused House leaders of "doing the Senate's dirty work."

Many Senate Democrats are not inclined to support a tax increase, either, particularly in an election year. Senate Budget Committee Chairman Kent Conrad (D-N.D.) said he has "grave doubt" that he could muster the votes to pass an AMT bill in a chamber where Democrats hold a 51-seat majority.

"I believe in my bones these things should be paid for," Conrad said. "But that's not the will of the United States Senate."

Yesterday, Senate Democrats unveiled their budget blueprint. It would rein in the AMT by increasing the federal deficit, which is once again projected to approach record levels.

The AMT issue is one of few significant differences between the House and Senate budget proposals. Both call for more spending on domestic programs -- the House seeks $22 billion more than the president's request, while the Senate seeks about $18 billion -- with the extra money going to education, energy programs and veterans benefits. Both would erase the deficit within in four years. Both assume that Bush's first-term tax cuts expire on schedule in 2010, prompting Republicans to accuse Democrats of plotting the biggest tax increase in U.S. history.

"We're not just talking about hurting rich people. We're talking about raising taxes on every American taxpayer," said Rep. Paul D. Ryan (Wis.), the senior Republican on the House Budget Committee.

Both plans, which are likely to be voted on next week, also put Congress on a collision course with the White House over federal spending. As he did last year, Bush has threatened to veto any spending bill that exceeds his request.